A You are presented with the following information relating to Messiter plc:

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(a) Using the historic cost accounts and stating the formulae you use, calculate the following accounting ratios for both \(19 \mathrm{X} 4\) and 19X5:
(i) Gross profit percentage;
(ii) Net profit percentage;
(iii) Stock turnover, stated in days;
(iv) Trade debtor collection period, stated in days; and (v) Fixed asset turnover.

(b) Using the following additional information:
(i) Restate the turnover for \(19 \mathrm{X} 4\) and \(19 \times 5\) incorporating the following average retail price indices:

(ii) Calculate the additional depreciation charge required to finance the replacement of fixed assets at their replacement cost. The company's depreciation policy is to provide 10 per cent per annum on original cost, assuming no residual value.
The replacement cost of fixed assets at 31 December was as follows:

(iii) Based upon these two inflation adjustments, why may it be misleading to compare a company's results for one year with that of another without adjusting for changes in general (RPI) or specific inflation?

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Year to 31 December 19X4 19X5 m m Profit and loss accounts: Turnover, all on credit terms 1,300 1,400 Cost of sales 650 770 Gross profit 650 630 Profit before taxation 115 130 Balance sheets at 31 December: Fixed assets at cost 850 8.50 Less Accumulated depreciation 510 595 Net book value 340 255 Stock at cost Trade debtors 105 135 142 190